Retail arbitrage affects brands of all sizes—from emerging startups to large, established product companies. Understanding what it is and how to prevent it is essential for protecting your brand’s credibility and revenue.
What Is Retail Arbitrage?
Retail arbitrage occurs when a reseller buys a product at a discounted price (often on sale) and resells it online—through platforms like Amazon, eBay, or Craigslist—for a profit. Some resellers even make their full-time income using this method.
Amazon, the world’s largest online marketplace, is especially prone to retail arbitrage. Without strict control over distribution channels, brands can face significant challenges, including undercut pricing and revenue loss. Unfortunately, Amazon prioritizes marketplace revenue and often hesitates to enforce seller pricing agreements. While the platform may assist high-volume sellers, most brands must tackle retail arbitrage proactively.
The Negative Impact of Retail Arbitrage
Retail arbitrage can hurt a brand in several key ways:
1. Brand Credibility – When unauthorized resellers deliver products late, damaged, expired, or in poor condition, it can lead to negative reviews and a damaged reputation.
2. Amazon Buy Box Competition – Resellers competing with your brand increase the difficulty of winning the Buy Box, directly impacting sales and visibility.
Ultimately, controlling retail arbitrage isn’t about policing every sale—it’s about having a proactive pricing and distribution strategy. Brands should recognize that heavy promotional discounts at other retailers can trigger arbitrage.
3 Strategies to Prevent Retail Arbitrage
Here are the most effective ways brands can minimize retail arbitrage:
1. Maintain Tighter Control with Wholesalers & Distributors
Strong relationships with wholesalers and distributors are critical. Clear communication about pricing expectations ensures that products don’t end up in unauthorized hands. Prevention starts at the source—before products even reach marketplaces like Amazon.
2. Implement Preventative Resale Clauses
Including resale clauses in your agreements allows brands to take action against unauthorized sellers. Without these legal protections, removing resellers from online marketplaces becomes extremely difficult.
3. Set Promotional Code Limitations
Limit the number of discounted units a single customer can purchase during promotions. Resellers often exploit bulk discounts to stockpile products for resale, which can erode your Buy Box share and hurt overall sales performance.
Protect Your Brand and Scale Smartly
At Retailbound, we help product startups and established brands navigate retail and Amazon sales channels. From strategy development to buyer introductions, our team provides hands-on support to make your retail launch successful.
Since 2008, we’ve helped over 500 brands get into 150+ major retailers across the U.S. and Canada. Contact us today to learn how we can help your brand break into retail and grow strategically.
About the Author
Yohan Jacob is the Founder and President of Retailbound, a retail channel management agency that helps emerging and established brands launch, scale, and thrive in both e-commerce and brick-and-mortar channels. With over a decade of experience, Yohan has guided brands into major retailers like Best Buy, Target, and Home Depot.
